Two Payment Trick – Don’t be caught out
With a rise in tax avoidance and disguised remuneration schemes, contractors need to be on their guard and be aware and wary of any provider offering them 2 payments for each pay run. Generally, the first payment will be applied at National Minimum Wage and taxed through PAYE and the second will have no tax applied and could be called a variety of names such as an advance or a loan.
These offerings lure the unsuspecting in with the promise of much higher-than-expected returns, often over 80% but don’t be fooled.
WHEN these anomalies are discovered by HMRC it could be you, the contractor, who has to pay the missing tax that is owed. The net result will be that you will end up with less money in the long term than if you had operated through a compliant provider.
How will HMRC know?
HMRC holds data from the Real Time Information submitted by a provider every time they pay you and in the case of disguised remuneration schemes, this will only show your income that has been taxed.
HMRC also receives reports from recruiters quarterly on how much they have sent to providers for each worker.
The combination of the two processes makes it easy for HMRC to identify where a disguised remuneration scheme could be operating and, once identified, all the workers who used the scheme.
Professional Passport’s Standards
Professional Passport will never knowingly approve any disguised remuneration scheme and we are firmly committed to ridding the market of them. If you have been offered any arrangement that you think is suspicious, we want to hear about it, whether the provider is Professional Passport approved or not.
This information allows us to ensure we maintain the highest standards across our providers.
If you have any concerns, please do not hesitate to get in touch with us through our Report a Concern and we will be happy to help.